Shares of firms from Bush's home state are outperforming those from Massachusetts. What's it mean?November 1, 2004: 3:51 PM EST
By Paul R. La Monica, CNN/Money senior writer

NEW YORK (CNN/Money) - Texas already has something over Massachusetts in election year 2004, even before the votes for George W. Bush or John Kerry are counted.

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Shares of companies based in Bush's home state of Texas are outperforming stocks of companies headquartered in Kerry's stomping grounds of Massachusetts.

"Outperforming" is a major understatement. It's no contest...kind of like Reagan-Mondale in 1984. We didn't need the Supreme Court to finalize the outcome here.

According to data from Thomson/Baseline, shares of 417 Texas stocks are up 18 percent this year on average compared to just a 2.4 percent gain for the 360 Massachusetts stocks.

What's more, stocks of the Lone Star State companies are much cheaper than their Massachusetts counterparts.

The Texas stocks trade at just 20 times earnings estimates for 2005 and have an average long-term growth rate of 16 percent a year. Bay State stocks trade for a whopping 36.5 times 2005 estimates even though their growth rate of 19 percent is only slightly higher.

Good news for Bush...

So does that bode well for Bush? Are investors hinting that they prefer the incumbent by favoring the more attractively valued Texas stocks over the pricier Massachusetts stocks? It could be.

For what it's worth, historical data from Thomson/Baseline shows that during the first three quarters of 2000, Texas stocks outperformed shares of companies headquartered in Tennessee, the home state of Democratic challenger Al Gore by a wide margin as well: 24.9 percent for Texas stocks versus a gain of only 1.7 percent for stocks from the Volunteer state.

Of course, it's kind of silly to suggest that stock market performance by state could be an accurate way of forecasting the results of the presidential election. In fact, there's actually a pretty simple reason to explain why Texas stocks have done so well this year. And it has little to do with politics.

Barry Ritholtz, chief market strategist with Maxim Group, pointed out that energy stocks, of which Texas has plenty, have flourished this year thanks to skyrocketing oil prices. Tech and health care stocks, big parts of the Massachusetts economy, have foundered.

Nearly a third of the companies based in Texas are energy stocks. The Bay State? It has no energy stocks headquartered there.

Tech and health care, on the other hand, have been two of the market's worst performing sectors this year and that drags down the Massachusetts performance, since nearly 42 percent of the public companies domiciled there are in either the health care or tech sectors. Less than 20 percent of Texas stocks are in one of these two struggling sectors.

So Ritholtz said that investors shouldn't read much into this, or other, so-called election indicators, especially since depending on which one you believe, both Bush and Kerry should win.

For example, he said that Bush Halloween masks have outsold Kerry masks this year, which should mean a victory for the man from Crawford, Texas.

But he quickly added that since the Green Bay Packers defeated the Washington Redskins on Sunday, this should "guarantee" that Kerry will win since a loss for the Redskins in their final home game before the election has always preceded a victory by the presidential challenger.

So something's gotta give. "What is a better indicator? Halloween masks going for Bush or the Redskins going for Kerry?" Ritholtz quipped.

...or maybe for Kerry?

But if you're still looking for clues from the market about the election, here's something else to chew on. Over the past month, Texas and Massachusetts stocks are in nearly a dead heat, with Texas stocks gaining 0.8 percent compared to a 0.6 percent for Massachusetts stocks.

Todd Campbell, president of E.B. Capital Markets, an independent research firm catering to institutions, suggested -- tongue firmly planted in cheek -- that this could be a good sign for Kerry. After all, the lead that Texas stocks have enjoyed over Massachusetts stocks this year is shrinking.

"Investors should stay tuned and see how the stocks close on Monday," he joked.

And finally, when you consider the performance of the home states of the vice-presidential candidates, it could be more encouraging for the Democrats.

Shares of companies based in John Edwards's North Carolina are up 8.2 percent this year while the stocks of firms headquartered in Dick Cheney's home state of Wyoming are down 8.9 percent.

Granted, there are only two companies based in Wyoming tracked by Thomson/Baseline. So our statistical "analysis" may be just a bit flawed.